Question

Calculate the following values using the figure below, which shows domestic supply and demand for steel in the United States under autarky.

 

 

Answer 1

a) Equilibrium occurs at the intersection of demand and supply curve. Under autarky, the equilibrium domestic price is $300 and the equilibrium domestic quantity is 200 thousand tons of steel. b) Suppose the United states allows trade, and the part trade domestic quantity supplied is 150 thousand tons of steel. It means at world price, the domestic supply of steel of steel is 150 thousand tons of steel. The given graph reflect that at the price of $250, the domestic quantity supplied is 150 thousand tons of steel and the domestic quantity demanded is 250 thousand tons of steel. The world price must be $250 and the domestic quantity demanded is 250 thousand tons of steel. c) At world price of $250, the domestic quantity demand(250 thousand tons of steel) exceeds the domestic quantity supplied(150 thousand tons of steel), implies U.S has exceed demand up steel at would price and there is a need to import the steel form the world market. The United